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Investors See More Biotech Consolidation After Questcor Buy: StockTwits.com

Investors on StockTwits.com believe Monday's $5.6 billion merger between Mallinckrodt and Questcor Pharmaceuticals will spur more acquisitions and support valuations in the biotech sector. Here are some of the other companies singled out as takeout targets.

NEW YORK (TheStreet) -- An acquisition in the biotech space Monday added weight to arguments that the sector is not overvalued after the recent sell-off. And investors on StockTwits.com readied their list of potential takeout targets mid-day even as the broader markets fell.

Mallinckrodt (MNK) announced before the bell that it will acquire Questcor Pharmaceuticals (QCOR) for $5.6 billion. Questcor shareholders will receive $30 per share in cash and $0.897 Mallinckrodt shares, according to the press release. The deal is a 27% premium over Questcor's Friday closing share price.

Questcor, which makes an FDA-approved multiple sclerosis treatment, rose more than 17% by 10:30 a.m. Mallinckrodt shares fell more than 3% as some investors doubted the company would quickly see a return on its investment.

Perhaps more importantly, the iShares Nasdaq Biotechnology ETF (IBB) rose 2.5% by mid-day as investors bet that the purchase would support valuations in the space and encourage more consolidation. Bullish sentiment on the biotechnology sector increased 3% to 53% after news of the acquisition, according to StockTwits' analytics.

Some cashtaggers said the Questcor buy, coupled with a correction that saw the biotech sector lose 13% in the past month, would spur larger health care companies to acquire smaller drug-makers with promising medications.